Tag: M&A

HDFC and HDFC Bank combined should grow at 14-15% in near term: Phillip Capital

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The National Company Law Tribunal (NCLT) on Friday approved the merger of HDFC with HDFC Bank. Other regulators, namely the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority have already given their approvals for this deal.

HDFC expects the merger process to be effective from the third quarter of the next financial year as the RBI approvals are a lengthy process.

Manish Agarwalla, Co-Head of Research at Phillip Capital, spoke about the post-merger growth prospects of HDFC and HDFC Bank. Agarwalla noted that while there can be moderation in growth, he still expects the combined entity to grow at a rate of 14-15 percent in the near term.

He said, “As a merged entity, obviously, because of the high pace, there can be some moderation in that growth going forward unlike the way HDFC Bank used to grow in the past. If you look between 2000 and 2009 the bank used to grow at a CAGR of 24-25 percent. Post-COVID the growth has come down to somewhere around 18 percent. We foresee this growth on a combined basis to be between 14 to 15 percent going ahead in the near term.”

However, he also cautioned that the premium valuations currently enjoyed by HDFC Bank may not carry over to the combined entity.

Read Here | Does the global banking crisis put Indian banks at risk? CNBC-TV18 analyses

In terms of stock performance, Agarwalla acknowledged that the banking sector has not been performing in line with expectations. However, he remains positive about the HDFC Bank from a medium to long-term perspective and reiterated that there is a cap on the valuation of the merged entity.

He added, “We see around say 15-20 percent upside in the medium term and we have an official target price of Rs 1,900 for the stock.”

When asked about specific banks, Agarwalla has a positive view of ICICI Bank, Axis Bank, Bandhan Bank, and Federal Bank. He sees significant upside potential for ICICI Bank, with a projected 22-25 percent increase in value.

He said, “We see a similar upside between 22-25 percent for ICICI Bank as well, in the medium term, I think the growth trigger for a bank would be their ability to surpass the systemic credit growth that will help them to report a very strong top line.”

He also noted that ICICI Bank may be able to deliver better margins than its peers.

Read Here | UBS to buy rival Credit Suisse in $3.3 billion deal to end crisis

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

View | ESG impact in M&A transactions

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Environmental, Social and Governance parameters (more popularly termed as “ESG”) are becoming the holy trinity of impact investing. Globally and in India, ESG is receiving much-deserved attention as a holistic and critical non-financial parameter to assess a target’s bottom line and its long-term value proposition. Recent research studies indicate the trend towards ESG integration in investment decisions and deal valuations.

In our view, ESG considerations are likely to impact the M&A industry in more ways than one. For instance, as per Kearney’s 2022 M&A report, there is an increasing M&A trend of companies acquiring new businesses to support their ESG goals. 35 percent shifting their portfolio towards an ESG focus, 85 percent of executives are acquiring nascent technologies to enable ESG, and 75 percent are divesting businesses unfit for ESG goals.

In this article, we list below a few key considerations which impact ESG deal-making:

• Target selection, valuation, and risk assessment

An ESG-aligned target can deliver long-term value and allow the capitalisation of synergies with companies having compatible ESG profiles. Companies with higher ESG scores have shown to have lower systemic risk exposure and cost of capital, thereby, translating into higher valuations. A target with robust processes resulting in energy efficiency or the use of renewables offers opportunities for decreasing operating costs and is an attractive option for many ESG-aligned investors.

Also Read: View | The emerging era of credible ESG reporting

ESG risk assessment requires evaluating the target’s industry performance against clear metrics relating to the reduction of carbon emissions, energy usage, water consumption, etc. However, this is a customisable list, and much would depend on the industry that the relevant target operates in. For example, social and governance considerations such as employee welfare, diversity and inclusion, data privacy and board processes may be more highly weighed for non-manufacturing companies.

• ESG-specific due diligence

There is a rising focus on ESG-specific legal and financial due diligence which involves identifying ESG risks and opportunities and assessing their impact. From a legal perspective, the key focus continues to remain on corrupt business practices, governance-related non-compliances, labour law violations, environmental non-compliances, cybersecurity threats, data privacy, diversity and inclusion, grievance redressal processes and quality of ESG reporting.

• Risk mitigation measures used in deal documentation

In deal documentation, ESG warranties that are aimed at ensuring adequate ESG policies, supply chain sustainability, absence of ESG incidents and workplace harassment, etc. may be included in addition to legal and tax warranties. For example, standard warranties relating to compliance with applicable law, the status of assets, accounts, book-keeping, privacy and environmental safety may be included in tandem with the ESG-specific warranties. While, general and specific indemnities are typically used to address legal and business risks; given that ESG risks are generally more difficult to quantify, there may often be a challenge with optimal risk coverage for ESG-related concerns. That said, investors are usually more mindful of conducting materiality assessments for ESG-related risks and may seek flexibility to alter valuations based on material risks. This reinforces the criticality of pre-acquisition ESG due diligence and its impact on deal valuations.

• Inorganic Expansion and focus on renewables

Many sectors are working on reducing their carbon footprint and ensuring adequate capital is invested in renewables. Organisations are also using inorganic growth to fuel their ESG goals and commitments to achieve decarbonisation, depolymerisation or increasing biodiversity. Recent industry news shows that companies are divesting fossil-based assets and moving to non-fossil-based assets through acquisitions of suitable targets, which would ultimately help achieve their goals faster by offsetting their existing carbon footprint.

Also Read: Here’s how technology impacts the environment and what the big IT firms are doing to reduce it

The 2022 Davos World Economic Forum also emphasised the criticality of ESG strategies and energy transition projects. After the United Nations Conference on Climate Change held in Glasgow in November 2021 (COP26), companies are implementing plans to reduce CO2 emissions to limit global temperature rises to 1.5°C above pre-industrial levels. Globally, the climate is being prioritised with a push towards clean technology, sustainable agriculture, food security and protecting biodiversity. Governments are issuing green and social bonds to incentivise adherence, urging corporates to move towards net-zero supply chains, recycling operations, energy efficient tools and reducing GHG emissions. India has also committed to the “Panchamrita” at the COP26 which includes, amongst others, meeting 50 percent of its energy requirement from renewables by 2030.

• Post Deal Integration

ESG integration post deal completion remains a critical aspect of M&A and can often be the determining factor for investors. Integration efforts must be sensitive to existing ESG processes to ensure that the company’s combined ESG profile is not adversely impacted. The focus should be placed on business continuity and human capital including management and employee retention and preservation of employee morale. During the integration, the value should be derived through stakeholder consultation, harmonising ESG targets and consolidation of the company’s ESG infrastructure.

Following advances already made in the European Union and other developed nations, India is on its way to developing a robust ESG-centric business environment. The need of the hour is to ensure data symmetry, robust reporting mechanisms and enhanced governance. That the regulators have put ESG in focus is evident from our very own sustainable reporting framework, called the Business Responsibility and Sustainability Reporting framework (BRSR) which is mandated by the SEBI from FY 2022-23 for the top 1000 listed companies (by market capitalisation). SEBI has also set out the regulatory framework for the issuance of listed green debt securities. Apart from this, we see enhanced corporate governance norms, regulation of influencers such as proxy advisors and various incentives to give a boost to India’s ESG commitments. The 2022 budget proposed setting up of thematic funds in India to mobilise funding toward sustainable development goals, which is a clear testimony that ESG has swung from a mere branding theme to a vital consideration in the M&A transactions. Though the transition is emerging gradually, the shift will continue steadily in the coming year.

-The author Suhana Islam Murshedd is Partner and Achint Kaur is Counsel at Khaitan & Co. The views expressed are personal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Zomato keeps preferential price unchanged in pursuit of Blinkit despite lower valuation from EY

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Zomato has kept its preferential price unchanged at Rs 70.76 per share for its Blinkit acquisition despite EY valuing it lower in the second round of evaluation.

On June 24, Zomato’s board gave its go-ahead for the Deepinder Goyal-led company to acquire the e-grocery startup Blinkit (formerly Grofers), which was founded by his long-time friend and former ‘Zoman’ Albinder Dhindsa.

In its first valuation report, EY had priced Zomato at Rs 70.76 per share, but the company obtained a second valuation after a specific request from exchanges.

Also Read: Zomato mulls a new group identity — Eternal

EY’s second valuation report used different valuation methodologies and determined that the fair value was lower.

The food delivery company’s stock has shot up over 23 percent in the past five trading sessions but is still down over 50 percent from its listing price.

Also Read | Timeline: Zomato’s year-long pursuit of Blinkit

In an all-stock deal, Zomato wants to swap shares with Blinkit, valuing the grocery delivery platform at $568 million. Zomato has cut Blinkit’s valuation nearly in half since turning the e-grocer into a unicorn in a $120 million funding round co-led with Tiger Global last August.

Zomato on Thursday said investment firm Tiger Global had reduced its stake in the company by almost half to 2.77 percent by selling over 18.45 crore shares in the open market. Tiger Global’s Internet Fund VI Pte Ltd had a holding of 5.11 percent in the online food delivery platform before the sale.

A day earlier, Ride-hailing app Uber offloaded 61.2 crore shares for Rs 3,088 crore through an open market transaction. According to bulk deal data available with BSE, Uber BV sold 61,21,99,100 shares, amounting to a 7.8 percent stake in the company.

Also Read: Zomato reports 42.7% increase in food revenue citing a rise in orders

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Storyboard18 – Stacks & Strategies | Why gaming companies are acquiring adtech firms and capabilities

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

2020 was a year of growing user base for gaming companies in India. The user base for both old and new companies grew manifold during the year, leading to the next bout of growth for these brands in 2021 in terms of monetization. In 2022, gaming companies are improving their sales pitches by offering advanced targeting options to their advertisers and acquiring adtech companies to help them.

According to domain experts with better targeting, the gaming companies are selling more inventory at better prices and also getting newer brands to advertise on their platforms.

Also Read | Important to have regulatory framework for skill gaming industry: Games24x7

First-party data, as experts say, is always the deal sweetener and gaming companies want to make the most out of it. The two options that they have to make this happen are to either partner with an adtech firm or to build one in-house.

In January 2022, Nazara Technologies Limited announced that it has entered an agreement to acquire a 55 percent stake in programmatic advertising and monetisation company Datawrkz where they would acquire a 33 percent stake in the first tranche by April 22 and reserve an option to acquire an additional 22 percent in the second tranche that is expected to close in the fourth quarter of FY23.

This happened around the same time when Microsoft also announced plans to acquire American video game company, Activision Blizzard, in an all-cash transaction valued at USD 68.7 billion.

This acquisition, according to a statement issued by Microsoft, would accelerate the growth of the company in the gaming business across mobile, PC, console and cloud and will also provide building blocks for the metaverse.

Big game: M&A deals, gaming focussed adtech

Similar plans are fueling more and more of such mergers and acquisition deals across the world including India. Nazara, for instance, believes the partnership will help them deliver highly optimised performance-based marketing solutions and improve its overall offerings across the spectrum.

Also Read | House of Gaming gears up to enter metaverse with new collaboration

According to Nazara Technologies CEO Manish Agarwal, the growth of gaming-focused adtech will be exponential in the coming decade across geographies with the growth of gamers and game publishers across freemium, web3.0 and skill-based real money gaming.

“Adtech companies with deep data processing capabilities and first-party data ownership will emerge as winners in gaming-focused adtech,” he said in a statement.

While the online gaming industry across India was valued at around Rs 79 billion in the year 2021, marking a leap from about Rs 65 billion in the previous year, according to business intelligence firm Statista, the sector is expected to be worth over Rs 150 billion by 2024.

A significant chunk of this growth will come from ad revenues, predict experts, and that’s where the role of adtech comes in. Targeted ads like any other platform are expected to bring in better ad volumes and push revenue growth in the process.

Explaining how partnering with adtech companies strengthen a gaming company’s scope for monetization, Niraj Bora, Founder and MD – Surmount Business Advisors Pvt Ltd says, “Partnerships like these maintain the dominance and increase the differentiation in the offerings. Changing market dynamics makes these acquisitions keep up the innovations in core business alive.”

What’s in it for the companies?

Picking up Nazara as an example, Bora tells Storyboard18, “Nazara’s core business of gaming generates huge data and ads are one of the primary sources of revenues. With Datawrkz on board, they will now improve the overall offerings across the spectrum.”

Also Read | Storyboard18 | Brands need to level up to get women gamers

Companies that are not looking at partnering with these companies are investing in an in-house adtech model to accelerate the growth of advertising on their platforms. One such example is Rooter. The game streaming platform is working on developing its very own adtech model. The model that is expected to be ready by the end of the year will increase the effectiveness of all ads on the platform by 40-50 percent, says Piyush Kumar, Nazara’s founder.

“We work with more than 100 brands every year and want to automate the process to serve the advertisers better and make their ROI grow. This helps the overall ecosystem bringing in growth to both us and our partner advertisers,” Kumar added.

Kumar also believes with better targeting with first-party data, the demand for advertising on their platform is expected to increase by up to 25 percent .

As per Statista, the revenue in the mobile games segment is expected to show an annual growth rate (CAGR 2022-2026) of 7.01 percent and experts believe advertising will contribute heavily to this growing number.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Fitch Ratings foresee increased M&A prominence among banks post HDFC merger

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The proposed merger of HDFC Bank and HDFC Ltd could redefine the competitive landscape for banks, and increase the prominence of M&A among lenders seeking to close market-share gap with the merged entity, Fitch Ratings said on Tuesday. Fitch believes that the proposed merger of the HDFC entities and the recently announced acquisition of Citibank India’s consumer business by Axis Bank could encourage banks to turn to M&A (merger and acquisition).

Also Read: Fitch Ratings affirms Future Retail at ‘RD’

“The proposed merger could redefine the competitive landscape for banks, and increase the prominence of M&A among banks seeking to close market-share gap with the merged HDFC Bank. It could also influence the evolution of the NBFI sector, particularly for large entities that have nurtured banking ambitions amid tightening sector regulations,” Fitch said in a statement. Large non-bank financial institution (NBFI) could be acquisition targets, given their higher-margin products, large pools of priority-sector customers and loans, and potential cross-selling opportunities.

Also Read: HDFC Bank shares extend losses to 6th straight day

“However, the regulatory attitude towards such acquisitions will be an important factor in their success,” the agency said. Last week, India’s most valuable lender HDFC Bank agreed to take over the country’s largest mortgage lender in a USD 40 billion deal, creating a financial services titan in the largest transaction in the nation’s corporate history.

The proposed entity will have a combined asset base of around Rs 18 lakh crore. The merger is expected to be complete by the second or third quarter of FY24, subject to regulatory approvals. Fitch said the combined HDFC entity will have an asset base of USD 340 billion, nearly half the size of the largest bank, State Bank of India, and double its nearest competitor, ICICI Bank.

The all-stock merger will take between 12-18 months to complete, subject to regulatory approvals.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Inter-state migrants coming back; IT employee headcount heading to 10 mn: TeamLease

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Manish Sabharwal, Executive VC, TeamLease Services, said that hiring in the IT industry has been remarkable. In fact, he is confident that employee headcount in the industry is heading to 10 million.

“Overall, the economy seems quite confident at least on the domestic consumption front and on the IT front – in terms of productivity and in terms of numbers – it is just remarkable. I don’t think anybody doubts that 5 million IT employment is going to 10 million,” he said.

Also Read: Hiring goes up as data centre demand surges in India

Also Read: Banks, NBFCs expected to hire 70,000 freshers in next three years, says report

Sabharwal expects growth to continue in Q4. He highlighted that companies are now forced to hire as demand has come back. Sabharwal mentioned that he is breathing easy knowing that he doesn’t need to look for labour any longer as inter-state migrant workers are now back.

“The Q4 will continue the trend that we had in Q3. Demand has come back. So the companies are being forced to do hiring. Interstate migrants, which were 65 million before the first lockdown went down to 50 million and there was a little tightness at the bottom of the pyramid. But our estimate is inter-state migrants are back up to 75 million. So the huge pressures that we had in finding people and you had to raise salary too, that also has eased a bit because the migrants are back,” he explained.

Also Read: War for Talent not just in IT; these sectors are also hiring big time

On hiring in other sectors, he said that the confidence among companies is at an unprecedented high. He said that education and healthcare industry is normalising while hospitality is far from it.

“Our view on the structural change is that with the digitization acceleration that has happened, confidence is at levels that we have never seen before. Education and healthcare are totally normalizing now. Hospitality is still far away from normalization,” he said.

On merger and acquisitions (M&As), he said that the company has had a tough time with it owing to the valuations. He also mentioned that the company is investing in tech and geographical footprints. Elaborating on the company’s margin, he explained that their target is 3-3.5 percent.

“We have had a really tough time doing M&A in the last year to a year-and-a-half just because of the way that private markets have been valuing companies,” he said.

“The opportunity in the next 5-10 years is nothing compared to what it was in the last 20 years. So we are investing in technology, we are investing in the geographic footprint.,” he added.

“This is our 20th year as a company and fifth year as a listed company, we went public at 0.9 percent margins, we are up to 1.92 percent margins. In the long-term 3-3.5 percent – I would volunteer – is our target,” he mentioned.

Watch the video for the full interview.

Catch all stock market updates here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

With $35 bn flowing into startups, total deals soar 40% to record $115 bn in 2021: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Led by a 50 percent jump in private equity funding to an all-time of over USD 66 billion, the overall deal activity soared nearly 40 percent to reach about USD 115 billion in 2021 across 2,064 transactions, according to a report that expects the momentum to continue this year. The Deal Street was boosted by a 50 percent jump in private equity (PE) deals in value terms to USD 66.1 billion, an all-time high in 2021 across 1,258 deals, which is 32 percent higher in volume compared with 2020, according to data compiled by PwC India.

Of the total PE money, as much as USD 35 billion were pumped into start-ups alone, the report added. Despite the headwinds from the pandemic and other looming uncertainties, the deal activity saw a record high in 2021 and surpassed pre-COVID-19 levels. The deal activity reached USD 114.9 billion with 2,064 transactions, a 40 percent increase from 2020 in terms of value and 60 percent in terms of volume, PwC said.

The record buoyancy in the deal activity was driven by abundant cash reserves, availability of private equity dry powder, foreign direct investments and lower interest rates, it said. Of the total, PE deals contributed 57 percent by value and 61 percent by volume, while mergers and acquisitions (M&As) contributed the remaining 43 percent by value and 39 percent by volume, it said.

Also Read| E-commerce logisitics startup Xpressbees turns unicorn; bags $300 mn Series F round from Blackstone, TPG & ChrysCapital

The country also saw record 43 start-ups turning into unicorns in 2021. Start-ups had a blockbuster with around USD35 billion raised across more than 1,000 rounds, a three times increase compared to 2020 and largely driven by fintech, edutech and software-as-a-service (SaaS). PwC India Partner and Leader (Deals) Dinesh Arora said that despite headwinds from the pandemic and other uncertainties, chief executive officers are significantly optimistic about the prospects for a stronger economy in the coming year.

“We, therefore, expect the deal momentum to continue in 2022, as we see a strategic shift taking place at the corporate side to digital and new disruptive business models driving M&A decision-making,” Arora said. M&A volumes more than doubled in 2021 and 28 percent in value over 2020 led by megadeals in renewables, infrastructure and education.

The technology sector continues to dominate the PE investment landscape and the year gone by saw 823 deals totalling USD 40 billion, around five times of 2020. This sharp increase is primarily owing to large deal size USD 5 billion deals totalled USD 12.1 billion and there were 78 mid-sized deals involving USD 100-1,000 million totalled USD 19.4 billion, compared to just 19 in 2020.

As more PE money poured in, there was also a major increase in their exits — over six times the exit value in 2020, led by strategic sales which accounted for 36 percent of the exit value in 2021.

Also Read | Next 1000 unicorns will be green energy innovators, says BlackRock CEO Larry Fink

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Union Budget 2022 may offer tax SOPs for start-ups, says report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The Union Budget next month is likely to bring tax SOPs for start-ups. The proposal in the Budget will offer to carry forward of losses and accumulated depreciation during mergers and acquisitions as a way to incentivise and promote consolidation in the start-up environment, a media report said.

The proposal in particular is aimed at the organised service and retail segments. It is currently not a definitive part of the upcoming project, but is being explored by Ministry of Finance officials for consideration, two people with knowledge of the matter told Mint.

The Centre may want to encourage consolidation in the emerging services sector to allow companies to reach the necessary scale where they can compete with global rivals. Companies in manufacturing and shipping sectors already get to enjoy carry forward losses and unabsorbed depreciation in the 7-8 years following a merger or acquisition, which allows them to offset the tax burden considerably by setting off their losses against income generated.

However, this proposition has not been available to start-ups in the retail and services sector. M&A for companies operating in the segment are tax heavy because of the potential tax burden after the amalgamation process is completed.

The Confederation of Indian Industry (CII) has already asked for SOPs like carrying forward losses, setting off previous losses against income, and unabsorbed depreciation under Section 72A of the Income Tax Act, be extended to start-ups. The body also stated that this can be done under approval from the Central Board of Direct Taxes institutes an expert committee on the same matter.

“Carry forward of losses in all types of amalgamations and demergers should be provided for. This would give greater flexibility on mergers and demergers,” Amrish Shah, Partner, Tax, Deloitte India when talking about some of the expectations from Budget 2022.

What will fuel #Mergers and #Acquisition activity in the #IndianEconomy? Amrish Shah, Partner, #Tax, Deloitte India elaborates as he shares #BudgetExpectations from an M&A perspective.https://t.co/jVfp7eyBYF #MergersandAcquisitions #Budget #UnionBudget2022 #DeloitteonBudget pic.twitter.com/yCwo20mENg

— Deloitte India (@DeloitteIndia) January 11, 2022

The service sector is the largest sector of the economy, accounting for a significant portion of the economy, and one of the fastest-growing not just in India but the world.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sebi amends delisting rules to make merger and acquisition more convenient

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Sebi has amended rules pertaining to the delisting of equity shares of a company following an open offer as part of efforts to make merger and acquisition transactions for listed companies more convenient. Under the new framework, promoters or acquirers need to disclose their intention to delist the firm through an initial public announcement, according to a notification.

If the acquirer is desirous of delisting the target company, the acquirer must propose a higher price for delisting with a suitable premium over the open offer price. In case the open offer is for an indirect acquisition, the open offer price and the indicative price will be notified by the acquirer at the time of making the detailed public statement and in the letter of offer.

“The indicative price shall include a suitable premium reflecting the price that the acquirer is willing to pay for the delisting offer with full disclosures of the rationale and justification for the indicative price so determined that can also be revised upwards by the acquirer before the start of the tendering period,” Sebi said in a notification on Monday. In the existing framework, if an open offer is triggered, compliance with takeover regulations could take the incoming acquirer’s holding to above 75 percent or perhaps even 90 percent.

However, to ensure compliance with the Securities Contract (Regulation) Rules, the acquirer would be forced to first bring his stake down to 75 percent as the Sebi delisting norms would not let the acquirer even to attempt at delisting unless the holding is first brought down to 75 percent. Such directionally contradictory transactions in a sequence pose complexity in the takeover of listed companies, especially where the acquirer desires to get the company delisted pursuant to his takeover.

The revised framework aims to make merger and acquisition (M&A transactions) for listed companies a more rational and convenient exercise, balancing the interest of all investors in the process. In the new framework, Sebi said that if the response to the open offer leads to the delisting threshold of 90 percent being met, all shareholders who tender their shares would be paid the indicative price.

In case the response to the offer leads to the delisting threshold of 90 percent not being met, all shareholders who tender their shares would be paid the open offer price. If a company does not get delisted following an open offer under this framework, and the acquirer crosses 75 percent due to the open offer, a period of 12 months from the date of completion of the open offer will be provided to the acquirer to make further attempts to delist the company using the reverse book building mechanism.

Such further delisting attempt will be successful if 50 percent of the residual public shareholding is acquired and delisting threshold is met. If delisting during this extended 12-month period is not successful, the acquirer then must comply with the minimum public shareholding norm within12 months from the end of such period.

If the acquirer at the time of open offer states upfront that it would opt for remaining listed, and the total stake at the end of the tendering period reaches above 75 percent, then the acquirer may opt for either proportionately scaling down of purchases made under both, i.e. the underlying share purchase agreement and the shares tendered under open offer. The scaling down will be done in a manner that the 75 percent threshold is never crossed or alternatively, the acquirer shall have to become compliant with minimum public shareholding within the time stipulated under the Securities Contract (Regulation) Rules, 1957.

To give this effect, the Securities and Exchange Board of India (Sebi) has amended the SAST (Substantial Acquisition of Shares and Takeovers) Regulations. The new rules came into effect from Monday. This came after the board of Sebi approved a proposal in this regard in September.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Trend is non-tech companies were buying stake in tech startups recently: Grant Thornton Bharat

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Merger and acquisition (M&A) has seen an uptrend this particular year, especially when the recovery has kicked started. Grant Thornton has come out with the deal tracker for February month and it has seen a good amount of traction in terms of volumes.

It is much higher than the previous year February 2020. On the other hand, the big trend that is emerging is the non-tech companies looking at a tech startup to adopt the technical advantage as well as get the digital space going.

Prashant Mehra, Partner at Grant Thornton Bharat, said, “Majority of the deals have actually witnessed within the usual sector. But many non-tech companies have bought tech firms in the startup space which can help advance digital transformation and provide and boost the customer experience as well.”

“What is really unique is that we have seen a lot of large companies such as ICICI, Tata they have actually gone into acquiring these tech companies.”

Talking about the sector seeing the most number of M&A deals, Mehra added, “Infrastructure definition is now advance from brick and mortar to include the information highways and technology as well.”

“These large companies, their systems are such that it takes them a while to incorporate something of their own and these tech companies have already built their platform, it is like plug and play for them. I think where we will see a lot of action is anything that is around e-commerce. My bet would be anything around e-commerce, health tech, edu tech anything around these sectors.”

Watch accompanying video for more.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow